Diesel deregulation on the cards; losses hit all-time low of 8p/litre

You may soon bid good bye to the monthly hikes in the prices of diesel, India’s most consumed fuel.

Diesel prices may soon become market-linked as in the case of petrol as deregulation looks imminent with losses of oil companies on diesel sales dropping to an all-time low of just 8 paise a litre.

Analysts said that petroleum subsidies are a significant part of the government’s fiscal deficit, which needs to be addressed.

“The government is likely to rationalise the subsidy outgo. We have already seen very strong progress on diesel subsidy and diesel decontrol is now likely in the near term.

Further, the government will look to curtail LPG (cooking gas) and kerosene subsidies via price hikes or supply rationalisation,” global investment bank Morgan Stanley said in a recent research report.

Alongside, this may once again open up the fuel retailing sector for private companies, thereby bettering services for consumers by instilling competition.

If under-recoveries on diese sales continue to decline, the prices of the fuel will be on a par with global rates by next week. This may negate the next increase of 50 paisa a litre due on October 1.

Petrol price was deregulated in June 2010 and has moved more or less in tandem with market rates.

This is the first time in over a decade that retail pump prices are almost in line with imported cost of diesel.

When the Narendra Modi-led government came to power in May, losses on diesel sales stood at Rs 4.41 a litre. Losses fell to Rs 1.62 a litre in the second half of June but doubled to Rs 3.40 in the first fortnight of July.

It stood at Rs 2.49 a litre in second half of July and Rs 1.78 in the second half of August.

Officials said that monthly increases had trimmed losses to less than Rs 3 per litre in May last year before a fall in the rupee’s value led to losses on diesel sale widening to Rs 14.50 per litre in September 2013.